The US Dollar Index (USDX), which gauges the Greenback's value against six major currencies, is edging higher, nearing the 97.5 level during Wednesday's Asian trading hours. Driving recent market movements, US President Donald Trump announced late Tuesday a 50% tariff on imported copper, also suggesting more steep sector-specific levies are imminent, including a striking "200%" on pharmaceutical imports. The lingering inflationary threat posed by these tariffs could potentially convince the Federal Reserve (Fed) to delay interest rate cuts until next year, which in turn might offer some support to the US Dollar. Currently, markets are anticipating a total of 50 basis points (bps) in Fed rate reductions by the end of this year, with the first cut expected in October.
Traders are keenly awaiting the FOMC Minutes for fresh impetus, as this report is expected to offer crucial hints about how Fed officials perceive the US economy and provide insight into the future interest rate path. Further guidance may come from several Fed policymakers set to speak later this week, with any dovish remarks having the potential to broadly drag the US Dollar lower. The Fed is widely expected to keep interest rates elevated, anticipating worsening inflation due to higher import taxes and a still-resilient US labor market. Investors continue to anticipate 50 basis points of Fed rate cuts by year-end, beginning in October. Consequently, the minutes from the last FOMC meeting and speeches by several Federal Reserve officials this week will be closely scrutinized for further insights into the central bank's policy outlook.
Most Asian stocks moved in a flat-to-low range on Wednesday as investors remained uncertain over the full scope of U.S. President Donald Trump’s trade tariffs. Mixed inflation data from China also weighed on sentiment across the region. Asian markets took a weak lead from Wall Street's muted overnight session, which saw Trump threatening new tariffs, this time on copper and pharmaceutical imports. Despite these threats, the President's comments about Washington's openness to further negotiation provided a degree of reassurance, spurring hopes for potential trade deals
Chinese stock markets presented a mixed picture on Wednesday. The China SSE and China SZSE indices both edged up by approximately 0.1%, while Hong Kong’s Hong Kong 50 index experienced a notable decline of about 0.9% as of 07:00 AM GMT. This mixed performance followed the release of middling inflation data. Government figures showed China's Consumer Price Index (CPI) inflation marginally improved in June, surpassing expectations but still remaining relatively subdued. However, Producer Price Index (PPI) inflation contracted more than anticipated, marking a 33rd consecutive month of decline and reaching its lowest level since July 2023. This data reinforces concerns about China's ongoing deflationary trend despite government efforts to stimulate domestic spending and the impact of existing U.S. tariffs on local producers grappling with sluggish overseas demand. China also issued a warning to the U.S. on Tuesday against reigniting a trade war, particularly as Trump intensified his tariff rhetoric this week. In Japan, the Japan 100 index saw minor losses of 0.3% as of 07:00 AM GMT on Wednesday, while the Japan 225 traded 0.35% lower. Investors in Japan, like elsewhere in Asia, are closely monitoring the evolving trade rhetoric from the U.S.
The main US equity indices traded mixed on Wednesday as investors reacted to President Trump's latest tariff announcements and his firm stance against extensions for new levies, set to begin August 1. These new tariffs, ranging from 25% to 40% on goods from various Asian and African countries, keep trade war concerns alive.
In corporate news, Amazon kicked off its extended Prime Day sales event. SoFi Technologies Inc. jumped to a record high after expanding its alternative investment offerings to include access to private companies.
Aside from the Federal Reserve's June meeting minutes, some price action could also be observed later today upon the release of the weekly crude oil inventories report from the Energy Information Administration as well as a US 10-year bond auction.
WTI Oil
Oil prices saw slight gains on Tuesday, with WTI and Brent reaching two-week highs, but faced pressure on Wednesday. This downturn is attributed to lingering uncertainty over new U.S. tariffs and anticipated increases in crude inventories.
The U.S. administration's recent tariff delay, now final for August 1, offered some hope for major trade partners like Japan, South Korea, and the European Union, implying potential deals could still be reached. However, new proposed levies, including a 50% tariff on copper and significant tariffs on pharmaceuticals, are broadening trade tensions and raising concerns about their impact on global oil demand.
Adding to the bearish sentiment are expectations of rising crude inventories in the U.S. Industry data suggests a potential build of around 7.1 million barrels, although fuel product stocks were lower. Official data from the U.S. Energy Information Administration (EIA) is due later today.
On the supply side, OPEC+ is reportedly set for another significant output boost for September, following a 548,000 barrels per day increase approved for August. This unwinds voluntary production cuts and adjusts quotas, further contributing to market supply. Despite these increases, some analysts note oil prices have shown surprising resilience.